The above trades should be some medium to long term trades.
Price Action, Pro, And Ichi Trading with 2ndskiesforex
EURUSD
After bouncing from the yearly low gaining ground for the last 3 of 4 weeks, the EURUSD got hammered last week losing all the gains and selling off to test the yearly lows again. It should be noticed how one week of impulsive selling took out four weeks of corrective gains, telling us the sellers are still in control as the market is more apropos to punish the Euro (rightfully so considering the situation in the EZ). Keep in mind, this is on the heels of a Spanish bailout two weeks ago, and a ESM funding agreement from Germany, yet sellers dominate.
With that being said, either this last sell-off is exhaustive in nature, or the market is looking to push for more downside. I think the latter and am looking for further deterioration in the pair. At this point, i'm either going to wait to see if the market will remain weak at these levels, and then look to sell near the former yearly lows on a breakout pullback to the 1.2300 level. Option 2 will be to sell rallies up to the 1.2650 area targeting 1.2300 and then a further break. If bulls want to take a play, look for a price action trigger of the current levels or just above 1.2300.
USDCHF
On the other side of the coin is the USDCHF which is actually giving a slightly better signal, not only having gained for 4 of the last 5 days, but also taking out the prior yearly high at .9772 and opening this week pushing above it from the open. Short term, it needs to clear .9800, but should it do so, I'm expecting further upside so longs are possible just north of this figure. Corrective pullbacks to the .9675-60 levels are another option for intraday longs. Bears will want to see a price action reversal trigger here and failure above before selling.
Gold
The precious metal continues to be hampered on the upside from the weekly 20ema which continues to act as dynamic resistance. This and the $1625-1640 region continues to hold the upside, so bulls will need to clear this before adding new technical buyers. Although there has been no weekly close below $1571, buying at this level doesn't work out from a risk perspective since the upside is still capped.
So I prefer buying in the $1550-1530 region with stops below $1525, targeting $1600, $1625 and a possible break above the 20ema for further continuation. Bears can meanwhile short off the 20ema with tight stops (being no breach above it since April) targeting $1571 and $1550. Keep in mind last week formed a pin bar setup so sellers can look for weakness heading into the dynamic resistance.
Oil
Although this commodity ended the week where it started, I am suspecting a medium term bottom is in place around the $78 base from last week. Although these recent gains were bolstered by rhetoric out of Iran and them blockading a key strait, I am looking for a higher low above the recent swing lows around $78, perhaps around $80.60/75 region.
If price pulls back here and shows weakness or does so in a corrective fashion, I will look to get long on these levels barring a price action trigger around here presents itself so bulls have a nice pullback level to take as the commodity still has yet to form a higher low to suggest further bottoming. Bears can look to sell above the recent pin bar rejection just shy of $89 which happens to be a nice role reversal level and ideal for possible selling here.
After bouncing from the yearly low gaining ground for the last 3 of 4 weeks, the EURUSD got hammered last week losing all the gains and selling off to test the yearly lows again. It should be noticed how one week of impulsive selling took out four weeks of corrective gains, telling us the sellers are still in control as the market is more apropos to punish the Euro (rightfully so considering the situation in the EZ). Keep in mind, this is on the heels of a Spanish bailout two weeks ago, and a ESM funding agreement from Germany, yet sellers dominate.
With that being said, either this last sell-off is exhaustive in nature, or the market is looking to push for more downside. I think the latter and am looking for further deterioration in the pair. At this point, i'm either going to wait to see if the market will remain weak at these levels, and then look to sell near the former yearly lows on a breakout pullback to the 1.2300 level. Option 2 will be to sell rallies up to the 1.2650 area targeting 1.2300 and then a further break. If bulls want to take a play, look for a price action trigger of the current levels or just above 1.2300.
USDCHF
On the other side of the coin is the USDCHF which is actually giving a slightly better signal, not only having gained for 4 of the last 5 days, but also taking out the prior yearly high at .9772 and opening this week pushing above it from the open. Short term, it needs to clear .9800, but should it do so, I'm expecting further upside so longs are possible just north of this figure. Corrective pullbacks to the .9675-60 levels are another option for intraday longs. Bears will want to see a price action reversal trigger here and failure above before selling.
Gold
The precious metal continues to be hampered on the upside from the weekly 20ema which continues to act as dynamic resistance. This and the $1625-1640 region continues to hold the upside, so bulls will need to clear this before adding new technical buyers. Although there has been no weekly close below $1571, buying at this level doesn't work out from a risk perspective since the upside is still capped.
So I prefer buying in the $1550-1530 region with stops below $1525, targeting $1600, $1625 and a possible break above the 20ema for further continuation. Bears can meanwhile short off the 20ema with tight stops (being no breach above it since April) targeting $1571 and $1550. Keep in mind last week formed a pin bar setup so sellers can look for weakness heading into the dynamic resistance.
Oil
Although this commodity ended the week where it started, I am suspecting a medium term bottom is in place around the $78 base from last week. Although these recent gains were bolstered by rhetoric out of Iran and them blockading a key strait, I am looking for a higher low above the recent swing lows around $78, perhaps around $80.60/75 region.
If price pulls back here and shows weakness or does so in a corrective fashion, I will look to get long on these levels barring a price action trigger around here presents itself so bulls have a nice pullback level to take as the commodity still has yet to form a higher low to suggest further bottoming. Bears can look to sell above the recent pin bar rejection just shy of $89 which happens to be a nice role reversal level and ideal for possible selling here.
EURUSD
After rejecting off the lows on friday forming an intraday pin bar setup, the Euro has built up small gains, but has done so via corrective price action telling us the buyers are not coming in any strength. Usually, this type of price action leads to a more impulsive sell off in the near future so I am looking to sell any rallies.
A good level I would look for an intraday short would be around 1.2360 which was a SL (swing low) point in the most recent sell-off before the pair consolidated. This should act as a gravity point for the market to pull back to so will look for price action triggers here.
For more info on how to trade price action, get access to the traders forum, lifetime membership & a lot more, make sure to visit my price action course page here.
Global Market Commentary:
Global indices lost modest ground today as a combination of trade data pending from China (just recently released) and further signs of slowing down in the emerging market economy worried investors. That plus additional signs of weakening in the Eurozone with Holland just having its credit rating downgraded (being one of the more stable EU economies as of late) putting further salt in the wound.
Add in the fact there are still concerns over the ESM bailout fund being a proper mechanism (legal as well), and there are still bugaboos hiding in the woods for the European economies.
The Dow lost 36pts today while Gold and Oil lost modestly.
Upcoming Economic Events:
GBP Visible Trade Balance (Pounds) 08.30GMT04.30EST
CAD Housing Starts 12.15GMT08.15EST
GBP NIESR Gross Domestic Product Estimate14.00GMT10.00EST
After rejecting off the lows on friday forming an intraday pin bar setup, the Euro has built up small gains, but has done so via corrective price action telling us the buyers are not coming in any strength. Usually, this type of price action leads to a more impulsive sell off in the near future so I am looking to sell any rallies.
A good level I would look for an intraday short would be around 1.2360 which was a SL (swing low) point in the most recent sell-off before the pair consolidated. This should act as a gravity point for the market to pull back to so will look for price action triggers here.
For more info on how to trade price action, get access to the traders forum, lifetime membership & a lot more, make sure to visit my price action course page here.
Global Market Commentary:
Global indices lost modest ground today as a combination of trade data pending from China (just recently released) and further signs of slowing down in the emerging market economy worried investors. That plus additional signs of weakening in the Eurozone with Holland just having its credit rating downgraded (being one of the more stable EU economies as of late) putting further salt in the wound.
Add in the fact there are still concerns over the ESM bailout fund being a proper mechanism (legal as well), and there are still bugaboos hiding in the woods for the European economies.
The Dow lost 36pts today while Gold and Oil lost modestly.
Upcoming Economic Events:
GBP Visible Trade Balance (Pounds) 08.30GMT04.30EST
CAD Housing Starts 12.15GMT08.15EST
GBP NIESR Gross Domestic Product Estimate14.00GMT10.00EST
EURUSD
After forming a medium bearish tenkan cross on July 5th, the Euro has remained relatively below the tenkan the entire time, suggesting strong momentum behind the selling with constant pressure. However, besides the large 2-way doji bar 2 candles back, we are suspecting a possible pause in the downtrend.
This is mostly based on daily and 4hr ichimoku number theory. On the daily chart, we have just formed a single section move from the last swing high, so possible turning point here. Keep in mind, this is after a marginally new low. On the 4hr as well though, we are creeping up on a period and 2 sections move from the top of this most recent sell-off. So when combined with the price action, we are sensing a pause in the selling here as possible over-extension regardless of the general all bearish ichimoku theme.
We'd like to wait for a pullback to the 1.2360 area which will likely bring the chikou to the price line or tenkan which may act as resistance. This combined with a very thick kumo and we have a good rally to sell point, along with a potential new bearish tenkan cross should we get the anticipated pullback.
Global Market Commentary:
The Fed Minutes failed to give global markets a boost (read executives who hold stocks) since they offered no new hints about possible QE3 coming or more bond buying programs. Although some traders were expecting this, it didn't materialize from the minutes release. This hurt stocks while favoring the USD against the basket of majors.
The Dow lost 48.59 pts while Asian markets are selling off aggressively mostly due to really weak AUD employment numbers coming well under expectations.
Upcoming Economic Announcements:
EUR ECB Publishes July Monthly Report 08.00GMT04.00EST
EUR Euro-Zone Industrial Production w.d.a. (YoY)09.00GMT05.00EST
USD Monthly Budget Statement 18.00GMT14.00EST
After forming a medium bearish tenkan cross on July 5th, the Euro has remained relatively below the tenkan the entire time, suggesting strong momentum behind the selling with constant pressure. However, besides the large 2-way doji bar 2 candles back, we are suspecting a possible pause in the downtrend.
This is mostly based on daily and 4hr ichimoku number theory. On the daily chart, we have just formed a single section move from the last swing high, so possible turning point here. Keep in mind, this is after a marginally new low. On the 4hr as well though, we are creeping up on a period and 2 sections move from the top of this most recent sell-off. So when combined with the price action, we are sensing a pause in the selling here as possible over-extension regardless of the general all bearish ichimoku theme.
We'd like to wait for a pullback to the 1.2360 area which will likely bring the chikou to the price line or tenkan which may act as resistance. This combined with a very thick kumo and we have a good rally to sell point, along with a potential new bearish tenkan cross should we get the anticipated pullback.
Global Market Commentary:
The Fed Minutes failed to give global markets a boost (read executives who hold stocks) since they offered no new hints about possible QE3 coming or more bond buying programs. Although some traders were expecting this, it didn't materialize from the minutes release. This hurt stocks while favoring the USD against the basket of majors.
The Dow lost 48.59 pts while Asian markets are selling off aggressively mostly due to really weak AUD employment numbers coming well under expectations.
Upcoming Economic Announcements:
EUR ECB Publishes July Monthly Report 08.00GMT04.00EST
EUR Euro-Zone Industrial Production w.d.a. (YoY)09.00GMT05.00EST
USD Monthly Budget Statement 18.00GMT14.00EST
EURUSD
After starting last week with a daily tenkan-kijun cross last week, the pair formed a bullish outside bar after a one section and one day move (using ichimoku number theory) which we had talked about last week in our forex market commentary. The last time it formed a bullish outside bar on the daily charts ironically was after a one section and one day move, and formed a bounce.
Although the tenkan is down, the kijun is flat and I am expecting a modest bounce either to 1.2281 or 1.2400 before the downtrend will resume. Thus, even though the Euro has been selling off every 2 of its last 3 days for some time, I'll favor a pullback before selling at the aforementioned levels instead of taking a short on a break.
USDCAD
After trending strongly for the month of may, the loonie has been in a volatile corrective pullback for the last 45 days, selling off exactly 1 out of every 2 days. With the selling days being equal to the buying, yet losing ground, the bears are clearly in control. But I have to confess the structured nature of the pullback (being exactly even in selling/buying days) along with the channel are pointing to more retracement style pullback instead of a full blown reversal of the trend. This leads me to believe a continuation of the may uptrend is more likely.
However, analysis of the channel suggests that if it breaks down further and touches the channel bottom before hitting the channel top, then the bears could be wrestling control from the bulls and look to take out key support at 1.0051. Bulls can take longs on the channel bottom or towards the 1.0051 support level while bears can look at selling around the channel top around 1.0275 which is near the pin bar high.
AUDUSD
While many of the majors are struggling vs. the USD, the Aussie has been making some headway and is potentially staging a medium term reversal. From an ichimoku perspective, it has all the ingredients with the prior kumo break, tenkan and kijun clearing the cloud as well. Now it just needs the chikou to clear the kumo and the ichimoku picture will be strongly bullish. I wrote last week how I suspected a pullback was likely and that is how it played out. I'm interested in longs near the flat kumo around parity which may happen in the middle of this week. Bears can look to sell at last weeks high around 1.0350 which might form a chikou rejection around the senkou span A.
Oil
After forming opposite pin bars in back to back weeks, oil is offering plays for both bulls and bears on a short term basis so we are going to map out both sides. For bears, there is a nice role reversal level coming up right around $89 which was a pin bar rejection from two weeks ago so a potential intraday setup there. Bulls on the other hand have a nice intraday base to take longs with tight stops at last weeks line in the sand which is right around $83.84 as the commodity is potentially forming a HL (higher low) and thus a base for a medium term reversal so potential for bulls here as well.
For those wanting to learn to trade price action or ichimoku, access to the traders forum, lifetime membership & more, visit my online traders course pages here.
After starting last week with a daily tenkan-kijun cross last week, the pair formed a bullish outside bar after a one section and one day move (using ichimoku number theory) which we had talked about last week in our forex market commentary. The last time it formed a bullish outside bar on the daily charts ironically was after a one section and one day move, and formed a bounce.
Although the tenkan is down, the kijun is flat and I am expecting a modest bounce either to 1.2281 or 1.2400 before the downtrend will resume. Thus, even though the Euro has been selling off every 2 of its last 3 days for some time, I'll favor a pullback before selling at the aforementioned levels instead of taking a short on a break.
USDCAD
After trending strongly for the month of may, the loonie has been in a volatile corrective pullback for the last 45 days, selling off exactly 1 out of every 2 days. With the selling days being equal to the buying, yet losing ground, the bears are clearly in control. But I have to confess the structured nature of the pullback (being exactly even in selling/buying days) along with the channel are pointing to more retracement style pullback instead of a full blown reversal of the trend. This leads me to believe a continuation of the may uptrend is more likely.
However, analysis of the channel suggests that if it breaks down further and touches the channel bottom before hitting the channel top, then the bears could be wrestling control from the bulls and look to take out key support at 1.0051. Bulls can take longs on the channel bottom or towards the 1.0051 support level while bears can look at selling around the channel top around 1.0275 which is near the pin bar high.
AUDUSD
While many of the majors are struggling vs. the USD, the Aussie has been making some headway and is potentially staging a medium term reversal. From an ichimoku perspective, it has all the ingredients with the prior kumo break, tenkan and kijun clearing the cloud as well. Now it just needs the chikou to clear the kumo and the ichimoku picture will be strongly bullish. I wrote last week how I suspected a pullback was likely and that is how it played out. I'm interested in longs near the flat kumo around parity which may happen in the middle of this week. Bears can look to sell at last weeks high around 1.0350 which might form a chikou rejection around the senkou span A.
Oil
After forming opposite pin bars in back to back weeks, oil is offering plays for both bulls and bears on a short term basis so we are going to map out both sides. For bears, there is a nice role reversal level coming up right around $89 which was a pin bar rejection from two weeks ago so a potential intraday setup there. Bulls on the other hand have a nice intraday base to take longs with tight stops at last weeks line in the sand which is right around $83.84 as the commodity is potentially forming a HL (higher low) and thus a base for a medium term reversal so potential for bulls here as well.
For those wanting to learn to trade price action or ichimoku, access to the traders forum, lifetime membership & more, visit my online traders course pages here.
While my trading team and I are mostly on vacation for the month of July, I wanted to write a brief article giving 2 key clues to understanding support and resistance levels, which is also a follow up to my prior article the best support and resistance levels part 1. If you can learn to understand these two key points, you will be able to detect key levels, when they are more likely to hold, and when they are more likely to be broken.
1) Prior History, Time Degradation, & Reactions to Key Levels in the Past
When analyzing to see if a level is one where traders are more likely to place trades around, we have to see how price reacted to those levels in the past.
Did price react very strongly to it in the past, say approach it one time, then reverse sharply off of it? If so, then its very likely the next time it approaches that level, traders will place orders around there expecting a similar reaction.
Why?
If price produced a very violent or strong reaction to it in the past, this was because a large amount of money was put on the line stating 'this is the line in the sand, this is highly over-valued or under-valued and we are placing a large bet here'. When this happens, its the first institution to get in that has the highest chance for profit, because they are the first to try and reverse the pair, thus getting the best price. But they also carry the most risk.
Regardless, if their reversal attempt works, other institutions will catch wind of this, and attempt to get in as close to the rejection level as possible. It really becomes a race between the institutions who can get the best price so many vie for it. This helps to further fuel the rejection and create a stronger reaction.
Smart traders take note of this level producing such a strong rejection and will more than likely take a play off of it a second time expecting it to hold. If an institution placed a large amount of money at a key level, they will likely defend it a second time (along with others as well). So expect this level to hold.
But...the reaction the second time around is usually not as strong.
Why?
Because more people are aware of it the second time. If it was a support level that produced a violent bounce, the second time around the sellers heading into that level will take profit. This means there is less of an opposing force on the sell side, so when the market bounces, there are less sellers who have to exit and thus fuel the counter trend play.
A good example of this is below in the daily Gold chart
Chart 1.1 Gold Daily
Gold was in a strong uptrend for all of 2011, eventually reaching $1900 an oz after climbing 3 out of every 4 days from July into mid August. Looking at the chart above, gold sold off quite heavily after reaching the $1900 level, selling off almost $200+ in 3 days.
Notice how the second time it approached this level, it held, but took over 13 days to sell off the same $200 amount. The first reaction was far more violent, while the second more tempered. The level held just fine, but when you see these situations, expect the response to be not as violent but still providing a great trade opportunity.
So anytime you see violent reactions to a level, look to place a trade at that level, expecting it to hold and produce a similar measured move. Obviously, if the reaction happens on a higher time frame, there is a greater chance it will produce a similar reaction. Whereas on a lower time frame, this will probably be less likely so be a little more choosy when looking to make a play like this.
Other factors to consider besides the strength of the reaction when understanding support and resistance levels is if the level produced a breakout pullback setup, has held several times in the past, and how much time the market spent at those levels. All of these factors will determine if there is a good setup there at that level.
2) Current Price Action
So often when people talk about levels, they only focus on the past and seem to forget to look at how the price action is behaving in the present. Just because a level held nicely in the past doesn't mean it will this time and you've probably experienced this, expecting a level to hold only to watch it get broken.
By learning to read the price action in real time, you can see if the market is approaching it with strength or weakness, impulsive-ness or corrective-ness, and then use this information to determine if a level will hold the oncoming assault or buckle forming a breakout or trend continuation.
Levels are just areas where traders place orders, but if the defenses of those levels are weak, they will not withstand the attack, so it is crucial you are always watching price action in real time to determine if this will hold.
Although I place my orders at key levels I think will hold, if the market is approaching it with several signs of strength, then I will consider waiting for a price action trigger at this level, or for it to hold before placing my order.
Below is an example of a key level that held in the past, but completely failed the second time with the market showing strength and signs it was going to fail.
Chart 1.2 EURUSD Daily
When the EURUSD started its massive sell off in late April, it did so in impressive fashion shedding over 600pips in 13 days with only one bull candle in the entire selloff. When it was approaching the yearly low (at B on the chart) around 1.2627 in 2012, notice how the selling started to pause going from really large impulsive candles to two small doji-like candles. The transition or change from large candles to small suggested hesitation on the sellers part heading into a key level they suspected might hold.
This weakness and hesitation was a good real time price action clue the market was likely to produce a bounce from the yearly low, and bounce it did, forming an engulfing bar which bounced about 150pips in two days. Many of our price action traders got in on this one, not only reading the weakness, but also using quantitative data on price action specifically for the EURUSD which communicated a likely reversal.
But notice what happens after a two day bounce - price then sells off aggressively again taking out the prior days lows and eating into over 75% of the two days' gains. This communicated to us in real time the sellers came back in force and were making an aggressive attempt to take out the level. So this was a good price action clue not to place another buy order at this level.
Notice how after it broke, the level served as a key role reversal level which gives us an opportunity to get short and join the trend.
There are many other clues one can use to read the price action in real time to determine if the level will hold or break, but these are just a few hints you can look for, along with looking for price action triggers off these key levels and quantitative data to support your level as well.
In Summary
So these are just 2 key clues you can use to understand support and resistance levels. It is critical to understand specifically how the market responded to a level in a past to determine first if it is a good level to make a play on.
But, so many times I hear traders talking only about how the market reacted in the past, and not paying attention to how the price action is developing in the present - which is a real time communication to the underlying order flow behind the attack on the support or resistance level. By learning to read this, along with level 2 quotes, you can greatly increase your ability to understand and place trades around key levels, either using them for reversal plays, breakout pullback setups, or looking for potential breakouts around these key levels.
1) Prior History, Time Degradation, & Reactions to Key Levels in the Past
When analyzing to see if a level is one where traders are more likely to place trades around, we have to see how price reacted to those levels in the past.
Did price react very strongly to it in the past, say approach it one time, then reverse sharply off of it? If so, then its very likely the next time it approaches that level, traders will place orders around there expecting a similar reaction.
Why?
If price produced a very violent or strong reaction to it in the past, this was because a large amount of money was put on the line stating 'this is the line in the sand, this is highly over-valued or under-valued and we are placing a large bet here'. When this happens, its the first institution to get in that has the highest chance for profit, because they are the first to try and reverse the pair, thus getting the best price. But they also carry the most risk.
Regardless, if their reversal attempt works, other institutions will catch wind of this, and attempt to get in as close to the rejection level as possible. It really becomes a race between the institutions who can get the best price so many vie for it. This helps to further fuel the rejection and create a stronger reaction.
Smart traders take note of this level producing such a strong rejection and will more than likely take a play off of it a second time expecting it to hold. If an institution placed a large amount of money at a key level, they will likely defend it a second time (along with others as well). So expect this level to hold.
But...the reaction the second time around is usually not as strong.
Why?
Because more people are aware of it the second time. If it was a support level that produced a violent bounce, the second time around the sellers heading into that level will take profit. This means there is less of an opposing force on the sell side, so when the market bounces, there are less sellers who have to exit and thus fuel the counter trend play.
A good example of this is below in the daily Gold chart
Chart 1.1 Gold Daily
Gold was in a strong uptrend for all of 2011, eventually reaching $1900 an oz after climbing 3 out of every 4 days from July into mid August. Looking at the chart above, gold sold off quite heavily after reaching the $1900 level, selling off almost $200+ in 3 days.
Notice how the second time it approached this level, it held, but took over 13 days to sell off the same $200 amount. The first reaction was far more violent, while the second more tempered. The level held just fine, but when you see these situations, expect the response to be not as violent but still providing a great trade opportunity.
So anytime you see violent reactions to a level, look to place a trade at that level, expecting it to hold and produce a similar measured move. Obviously, if the reaction happens on a higher time frame, there is a greater chance it will produce a similar reaction. Whereas on a lower time frame, this will probably be less likely so be a little more choosy when looking to make a play like this.
Other factors to consider besides the strength of the reaction when understanding support and resistance levels is if the level produced a breakout pullback setup, has held several times in the past, and how much time the market spent at those levels. All of these factors will determine if there is a good setup there at that level.
2) Current Price Action
So often when people talk about levels, they only focus on the past and seem to forget to look at how the price action is behaving in the present. Just because a level held nicely in the past doesn't mean it will this time and you've probably experienced this, expecting a level to hold only to watch it get broken.
By learning to read the price action in real time, you can see if the market is approaching it with strength or weakness, impulsive-ness or corrective-ness, and then use this information to determine if a level will hold the oncoming assault or buckle forming a breakout or trend continuation.
Levels are just areas where traders place orders, but if the defenses of those levels are weak, they will not withstand the attack, so it is crucial you are always watching price action in real time to determine if this will hold.
Although I place my orders at key levels I think will hold, if the market is approaching it with several signs of strength, then I will consider waiting for a price action trigger at this level, or for it to hold before placing my order.
Below is an example of a key level that held in the past, but completely failed the second time with the market showing strength and signs it was going to fail.
Chart 1.2 EURUSD Daily
When the EURUSD started its massive sell off in late April, it did so in impressive fashion shedding over 600pips in 13 days with only one bull candle in the entire selloff. When it was approaching the yearly low (at B on the chart) around 1.2627 in 2012, notice how the selling started to pause going from really large impulsive candles to two small doji-like candles. The transition or change from large candles to small suggested hesitation on the sellers part heading into a key level they suspected might hold.
This weakness and hesitation was a good real time price action clue the market was likely to produce a bounce from the yearly low, and bounce it did, forming an engulfing bar which bounced about 150pips in two days. Many of our price action traders got in on this one, not only reading the weakness, but also using quantitative data on price action specifically for the EURUSD which communicated a likely reversal.
But notice what happens after a two day bounce - price then sells off aggressively again taking out the prior days lows and eating into over 75% of the two days' gains. This communicated to us in real time the sellers came back in force and were making an aggressive attempt to take out the level. So this was a good price action clue not to place another buy order at this level.
Notice how after it broke, the level served as a key role reversal level which gives us an opportunity to get short and join the trend.
There are many other clues one can use to read the price action in real time to determine if the level will hold or break, but these are just a few hints you can look for, along with looking for price action triggers off these key levels and quantitative data to support your level as well.
In Summary
So these are just 2 key clues you can use to understand support and resistance levels. It is critical to understand specifically how the market responded to a level in a past to determine first if it is a good level to make a play on.
But, so many times I hear traders talking only about how the market reacted in the past, and not paying attention to how the price action is developing in the present - which is a real time communication to the underlying order flow behind the attack on the support or resistance level. By learning to read this, along with level 2 quotes, you can greatly increase your ability to understand and place trades around key levels, either using them for reversal plays, breakout pullback setups, or looking for potential breakouts around these key levels.
EURUSD
After forming a corrective pullback last week comprised of an outside bar, a double pin bar and an inside bar, the Euro resumed its natural selling posture and rightfully so considering what is happening in the EZ. The financial cancer in Spain has been metastasizing and is entering what I feel is its terminal phase with every region starting to request bailout funding. The truth is there will not be enough for all of them so something has to break.
This resulted technically in the EURUSD selling off more on friday than it had gained in the last 7 days reminding us the market will continue to be more appropos to sell Euros than buy them, and it did so by breaking the prior yearly lows, almost forming a maribozu.
Although the pair is at a major channel bottom, i'll take price action pullbacks or rallies as opportunities to sell as I'm expecting more selling and more economic turmoil to give investors reasons to sell Euros. Immediate upside resistance is now parked above at 1.2322 which was a double weekly rejection for the prior two. Intraday players can look to short between 1.2169 and 1.2157 looking for an eventual break of 1.2100 targeting the big figure at 1.2000.
EURAUD
Playing on the sell the euro theme which I think will continue for the majority of this week and for some time ahead, I like selling EUR vs. AUD. From an ichimoku perspective, the pair has remained below the tenkan now since the 1st week in June which is quite an impressive run.
This is communicating incredibly strong momentum to stay below it for such a long period of time, and considering the current separation from it, we'd rather wait for a pullback to sell a rally and get back into the trend then playing a break lower. And I'm confident I'll get it - perhaps this week with tight stops above. I'll even consider a pullback to the Kijun to sell along with waiting for a future downward TKx signal but short is where I would like to be on the EUR vs. the AUD as it has now been selling off for 9 weeks straight. Thus, I'm expecting a natural pullback, but will take them to sell again.
USDCAD
Last week in our price action and ichimoku weekly commentary, we talked about how bulls should look for longs off the channel bottom and key support area around 1.0050/70 area. This is exactly where price stopped last week bouncing over 100pips to end the week. Many of our price action course members made profits on this with little risk so hopefully you did as well. Traders can wait for the channel play towards the upside to sell, or another pullback into the aforementioned support zone to buy the pair targeting the daily 20ema and other side of the channel.
NZDUSD
Looking at the Kiwi lately, I am noticing how it has been failing to hold above the flat top kumo even though it has rejected off of it twice - yet failed to grab hold of the upside play. This combined with the chikou failing to clear the Kumo suggests minimally likely range play short term but a possible breakdown coming soon back into the Kumo. When the chikou span struggles like this to break the Kumo in strong fashion, it usually means breakdown so I am waiting for either a sell around .8051 or a break through key support levels at .7839 and .7809 for the downside targets of .7650 and potentially .7450.
For those wanting to learn to trade price action or ichimoku, access to the traders forum, lifetime membership & more, visit my online traders course pages.
After forming a corrective pullback last week comprised of an outside bar, a double pin bar and an inside bar, the Euro resumed its natural selling posture and rightfully so considering what is happening in the EZ. The financial cancer in Spain has been metastasizing and is entering what I feel is its terminal phase with every region starting to request bailout funding. The truth is there will not be enough for all of them so something has to break.
This resulted technically in the EURUSD selling off more on friday than it had gained in the last 7 days reminding us the market will continue to be more appropos to sell Euros than buy them, and it did so by breaking the prior yearly lows, almost forming a maribozu.
Although the pair is at a major channel bottom, i'll take price action pullbacks or rallies as opportunities to sell as I'm expecting more selling and more economic turmoil to give investors reasons to sell Euros. Immediate upside resistance is now parked above at 1.2322 which was a double weekly rejection for the prior two. Intraday players can look to short between 1.2169 and 1.2157 looking for an eventual break of 1.2100 targeting the big figure at 1.2000.
EURAUD
Playing on the sell the euro theme which I think will continue for the majority of this week and for some time ahead, I like selling EUR vs. AUD. From an ichimoku perspective, the pair has remained below the tenkan now since the 1st week in June which is quite an impressive run.
This is communicating incredibly strong momentum to stay below it for such a long period of time, and considering the current separation from it, we'd rather wait for a pullback to sell a rally and get back into the trend then playing a break lower. And I'm confident I'll get it - perhaps this week with tight stops above. I'll even consider a pullback to the Kijun to sell along with waiting for a future downward TKx signal but short is where I would like to be on the EUR vs. the AUD as it has now been selling off for 9 weeks straight. Thus, I'm expecting a natural pullback, but will take them to sell again.
USDCAD
Last week in our price action and ichimoku weekly commentary, we talked about how bulls should look for longs off the channel bottom and key support area around 1.0050/70 area. This is exactly where price stopped last week bouncing over 100pips to end the week. Many of our price action course members made profits on this with little risk so hopefully you did as well. Traders can wait for the channel play towards the upside to sell, or another pullback into the aforementioned support zone to buy the pair targeting the daily 20ema and other side of the channel.
NZDUSD
Looking at the Kiwi lately, I am noticing how it has been failing to hold above the flat top kumo even though it has rejected off of it twice - yet failed to grab hold of the upside play. This combined with the chikou failing to clear the Kumo suggests minimally likely range play short term but a possible breakdown coming soon back into the Kumo. When the chikou span struggles like this to break the Kumo in strong fashion, it usually means breakdown so I am waiting for either a sell around .8051 or a break through key support levels at .7839 and .7809 for the downside targets of .7650 and potentially .7450.
For those wanting to learn to trade price action or ichimoku, access to the traders forum, lifetime membership & more, visit my online traders course pages.
AUDUSD
After posting a strong 3 day pullback, the Aussie found strong support at the kijun sen support forming an outside bar in the process. This also coincided with a short term channel support which has now played out 3x on both ends. Although the Kijun is currently flat, it held price and combined with the tenkan climbing, I am expecting more upside.
The chikou though rejected off the Span B and is still having trouble making headway which leaves me to believe upside will be seriously challenged around 1.0450 - 1.0500. Bears can look for price action triggers around here to possibly sell if the pair shows weakness on approach. Bulls meanwhile can look for intraday longs around 1.0200 targeting 1.0300 and 1.0450.
Global Market Commentary:
Spain is getting closer to asking for a full bailout as the regions' insolvency becomes evermore apparent. Regardless, a short squeeze seems to be in play on the EURUSD and majors which is not surprising considering it has been bruised heavily as of late. This combined with stronger ECB measures and whispers of Central Bank involvement (read easing) coming soon to a market near you, and markets gained some lost ground.
Regardless, New Home Sales in the US missed by the most in 20mos coming in at -8.4% reminding us there are hot potatoes and disasters looming in every major economy, and it only takes one ball to drop for us to be sellers.
The DOW gained 58pts while Gold closed at $1608. If easing is in the pipeline, expect Gold to gain heavily on this so what we could be seeing is accumulation ahead of the next round of easing.
Upcoming Economic Events:
EUR German GfK Consumer Confidence Survey06.00GMT02.00EST
USD Durable Goods Orders 12.30GMT08.30EST
USD Pending Home Sales (YoY) 14.00GMT10.00EST
Make sure to read my newest article 2 Key Clues to Understanding Support and Resistance
After posting a strong 3 day pullback, the Aussie found strong support at the kijun sen support forming an outside bar in the process. This also coincided with a short term channel support which has now played out 3x on both ends. Although the Kijun is currently flat, it held price and combined with the tenkan climbing, I am expecting more upside.
The chikou though rejected off the Span B and is still having trouble making headway which leaves me to believe upside will be seriously challenged around 1.0450 - 1.0500. Bears can look for price action triggers around here to possibly sell if the pair shows weakness on approach. Bulls meanwhile can look for intraday longs around 1.0200 targeting 1.0300 and 1.0450.
Global Market Commentary:
Spain is getting closer to asking for a full bailout as the regions' insolvency becomes evermore apparent. Regardless, a short squeeze seems to be in play on the EURUSD and majors which is not surprising considering it has been bruised heavily as of late. This combined with stronger ECB measures and whispers of Central Bank involvement (read easing) coming soon to a market near you, and markets gained some lost ground.
Regardless, New Home Sales in the US missed by the most in 20mos coming in at -8.4% reminding us there are hot potatoes and disasters looming in every major economy, and it only takes one ball to drop for us to be sellers.
The DOW gained 58pts while Gold closed at $1608. If easing is in the pipeline, expect Gold to gain heavily on this so what we could be seeing is accumulation ahead of the next round of easing.
Upcoming Economic Events:
EUR German GfK Consumer Confidence Survey06.00GMT02.00EST
USD Durable Goods Orders 12.30GMT08.30EST
USD Pending Home Sales (YoY) 14.00GMT10.00EST
Make sure to read my newest article 2 Key Clues to Understanding Support and Resistance
For all those traders interested or currently trading Ichimoku, you will not want to miss this article.
Although I am heading out in a few hours with my girlfriend to Harbin Hot Springs, I wanted to write a brief introduction to Ichimoku Number Theory as there has been a lot of questions (and confusion) about ichimoku settings, time frames, etc.
The basis of Ichimoku as known to most is the 5 lines;
1) Tenkan Line
2) Kijun Line
3) Senkou Span A (part of the Kumo)
4) Senkou Span B (other part of the Kumo)
5) Chikou Line
Almost 95% of the commentary, traders, educators and understanding of the ichimoku kinko hyo view this as the basis of ichimoku.
This is actually incorrect.
The basis of Ichimoku are the three pillars which are listed below;
1) Ichimoku Number Theory (also has to do with time)
2) Ichimoku Wave Theory
3) Ichimoku Price Theory
These are the three pillars of ichimoku, but the root of all them is based on the ichimoku number theory.
4.5yrs
Goichi Hosada (founder of Ichimoku) in his development of ichimoku, spent 4.5yrs of his study just on number theory. He studied pretty much every Eastern and Western theory under the sun, and eventually settled upon 3 basis numbers that he not only made the basis of ichimoku theory, but underlined all of reality.
NOTE: I have an interesting follow up story to tell about this so remind me to discuss it later.
The three numbers he made as the basis for ichimoku were 9, 17 and 26.
So the idea that the reason why the Kijun was set to 26 periods had to do with the former 6 day Japanese trading week is false.
The kijun was set to this measurement, along with the tenkan - based on his findings.
What this means is, for those who are asking the question about should we adjust the settings since we are not working with a full trading week, or are trading an intraday time frame, is in effect answered. Regardless of the trading week or time frame, we are best served from an ichimoku perspective keeping the original settings. So hopefully this puts that one to rest and the kabbash on all the alternative theories.
The 10 Numbers
Although there were 3 basic numbers which underlie the entire set of ichimoku numbers, there were 10 in all. They are listed below;
9
17
26
*These three represent the basic or simple numbers
33
42
65
76
129
172
200-257
Now if you do a quick calculation, 9+17 = 26. 26+17 = 42+1. 33+9 = 42. 33x2 = 65+1. 42+33 = 76-1. 65x2 = 129+1. 129+42 = 172-1. So all these numbers are interrelated and all comprised of the basic numbers in some way.
There are names for these numbers like one section, two sections, one period, etc. which I will get into a later date, but the basic three names are;
one section (9)
two sections (17)
1 period (26)
So if you see me using this terminology in my future ichimoku posts, you will know what I am talking about.
Use in Practice
Ideally, ichimoku number/time theory should be used in combination with the price and wave theories. So by itself, it is limited. But we can start the introduction with the basic concept. This is, the market is more likely to have a turning point or strong price action reaction around these numbers. They are not meant to be treated as fixed in stone numbers, but moreso higher probability turning or reaction points. An example of this is below;
AUDUSD Daily Chart
Now using the chart above, lets make some observations:
A-B = 41 (1 short of 42 bar move)
B-C = 16 (1 short of two section move/17)
C-D = 26 bars exactly or one period
D-E = 18 bars (1 short of two sections move)
E-F = 26 bars exactly or one period
Now this is just one chart and there will be many that are not so accurate upon first glance, and others that are. JPY pairs tend to move and respond more to the ichimoku paramters and numbers since a great amount of Japanese traders are primarily trading ichimoku strategies, and therefore are making trades based on it.
However, from my experience, this works on most pairs, commodities, and indices across the board, so quite potent and relevant. Keep in mind, it is important to understand we do not just apply the ichimoku number/time theory in isolation, but mate it with ichimoku price and wave theory. When combined, they become very highly predictive tools for catching major turning points, finding precise targets and determining future support and resistance levels, so powerful tools when yielded properly.
In Summary
Although this is just an introduction, I hope this gives you a better understanding of Ichimoku and how not to relate to it in just its basic form, but understand there is more going on than just the 5 lines. Anyone just teaching and professing the 5 lines as the be all end all of ichimoku have very little understanding of it.
Goichi Hosada once said about this in the mid 80's;
"Of the 10,000 or so people who are practicing and trading ichimoku, only about 10 really understand it."
Keep in mind, when he was saying it, he was including himself and his grandson, so not many. This is because people get too fascinated with the 5 lines and relate to that only without ever taking the time to understand what it is all about. Although the 5 lines are potent and informative by themselves, they are a small fraction of the ichimoku picture and information contained in the ichimoku kinko hyo chart, so keep this in perspective.
I'll be doing further introductory articles about these additional elements in the future over the next several months, but hopefully this sparks your curiosity and imagination for now.
For those wanting to learn how to trade the Ichimoku Cloud, ichimoku time, ichimoku price and ichimoku wave theory, along with lifetime access to the Ichimoku traders forum, using rule-based systems, make sure to check out my Advanced Ichimoku Course.
Although I am heading out in a few hours with my girlfriend to Harbin Hot Springs, I wanted to write a brief introduction to Ichimoku Number Theory as there has been a lot of questions (and confusion) about ichimoku settings, time frames, etc.
The basis of Ichimoku as known to most is the 5 lines;
1) Tenkan Line
2) Kijun Line
3) Senkou Span A (part of the Kumo)
4) Senkou Span B (other part of the Kumo)
5) Chikou Line
Almost 95% of the commentary, traders, educators and understanding of the ichimoku kinko hyo view this as the basis of ichimoku.
This is actually incorrect.
The basis of Ichimoku are the three pillars which are listed below;
1) Ichimoku Number Theory (also has to do with time)
2) Ichimoku Wave Theory
3) Ichimoku Price Theory
These are the three pillars of ichimoku, but the root of all them is based on the ichimoku number theory.
4.5yrs
Goichi Hosada (founder of Ichimoku) in his development of ichimoku, spent 4.5yrs of his study just on number theory. He studied pretty much every Eastern and Western theory under the sun, and eventually settled upon 3 basis numbers that he not only made the basis of ichimoku theory, but underlined all of reality.
NOTE: I have an interesting follow up story to tell about this so remind me to discuss it later.
The three numbers he made as the basis for ichimoku were 9, 17 and 26.
So the idea that the reason why the Kijun was set to 26 periods had to do with the former 6 day Japanese trading week is false.
The kijun was set to this measurement, along with the tenkan - based on his findings.
What this means is, for those who are asking the question about should we adjust the settings since we are not working with a full trading week, or are trading an intraday time frame, is in effect answered. Regardless of the trading week or time frame, we are best served from an ichimoku perspective keeping the original settings. So hopefully this puts that one to rest and the kabbash on all the alternative theories.
The 10 Numbers
Although there were 3 basic numbers which underlie the entire set of ichimoku numbers, there were 10 in all. They are listed below;
9
17
26
*These three represent the basic or simple numbers
33
42
65
76
129
172
200-257
Now if you do a quick calculation, 9+17 = 26. 26+17 = 42+1. 33+9 = 42. 33x2 = 65+1. 42+33 = 76-1. 65x2 = 129+1. 129+42 = 172-1. So all these numbers are interrelated and all comprised of the basic numbers in some way.
There are names for these numbers like one section, two sections, one period, etc. which I will get into a later date, but the basic three names are;
one section (9)
two sections (17)
1 period (26)
So if you see me using this terminology in my future ichimoku posts, you will know what I am talking about.
Use in Practice
Ideally, ichimoku number/time theory should be used in combination with the price and wave theories. So by itself, it is limited. But we can start the introduction with the basic concept. This is, the market is more likely to have a turning point or strong price action reaction around these numbers. They are not meant to be treated as fixed in stone numbers, but moreso higher probability turning or reaction points. An example of this is below;
AUDUSD Daily Chart
Now using the chart above, lets make some observations:
A-B = 41 (1 short of 42 bar move)
B-C = 16 (1 short of two section move/17)
C-D = 26 bars exactly or one period
D-E = 18 bars (1 short of two sections move)
E-F = 26 bars exactly or one period
Now this is just one chart and there will be many that are not so accurate upon first glance, and others that are. JPY pairs tend to move and respond more to the ichimoku paramters and numbers since a great amount of Japanese traders are primarily trading ichimoku strategies, and therefore are making trades based on it.
However, from my experience, this works on most pairs, commodities, and indices across the board, so quite potent and relevant. Keep in mind, it is important to understand we do not just apply the ichimoku number/time theory in isolation, but mate it with ichimoku price and wave theory. When combined, they become very highly predictive tools for catching major turning points, finding precise targets and determining future support and resistance levels, so powerful tools when yielded properly.
In Summary
Although this is just an introduction, I hope this gives you a better understanding of Ichimoku and how not to relate to it in just its basic form, but understand there is more going on than just the 5 lines. Anyone just teaching and professing the 5 lines as the be all end all of ichimoku have very little understanding of it.
Goichi Hosada once said about this in the mid 80's;
"Of the 10,000 or so people who are practicing and trading ichimoku, only about 10 really understand it."
Keep in mind, when he was saying it, he was including himself and his grandson, so not many. This is because people get too fascinated with the 5 lines and relate to that only without ever taking the time to understand what it is all about. Although the 5 lines are potent and informative by themselves, they are a small fraction of the ichimoku picture and information contained in the ichimoku kinko hyo chart, so keep this in perspective.
I'll be doing further introductory articles about these additional elements in the future over the next several months, but hopefully this sparks your curiosity and imagination for now.
For those wanting to learn how to trade the Ichimoku Cloud, ichimoku time, ichimoku price and ichimoku wave theory, along with lifetime access to the Ichimoku traders forum, using rule-based systems, make sure to check out my Advanced Ichimoku Course.
EURUSD
After forming a new yearly low last week, the pair produced its strongest 3 day climb (from top to bottom) for the entire 2012 year which is impressive considering the economic situation is far worse than it was in 2011. I suspect this was more of a short squeeze than anything, and am really just waiting for the shoe to drop (any) which means either Spain asking for another bailout and admitting they are broke, Greece leaving the EZ, or Germany not wanting to bail out any more countries.
Regardless, I'm taking the sell rallies approach, especially considering the range of the last two days which is a choppy range with the 1.2389 highs and 1.2224 lows. Intraday players can look for price action reversal plays at these levels should volatility and volume be down for tomorrow. Meanwhile, my sell on rally point is first parked at 1.2415 which was range support for the last 3 weeks of June. My other medium term rally point to sell is the weekly 20ema and Jan. 12' lows at 1.2630.
EURAUD
In last weeks price action & ichimoku chart commentary, I talked about how the EURAUD was a pair I was looking to sell on pullbacks to the Tenkan line as it held below this since late June, and every pullback to the tenkan line resulted in a rejection and further losses. This is exactly what happened last week as the pair (after forming an outside bar) faltered into the tenkan line, and continued selling off over 150+pips so with very little stop needed so hopefully you profited from this.
Intraday ichimoku traders can wait for a pullback again to the daily tenkan, or perhaps a deeper pullback to the 1.1750 level which is the 4hr tenkan and range support that is now resistance.
AUDUSD
Speaking of the Aussie, the AUDUSD has climbed for the last 5 days which is impressive since its only done this 5x in the last 1.5yrs. What is interesting to note is it has not had a 6 day climb for all of 2012 and only 2 of 2011. This, combined with the fact (from an ichimoku number theory perspective) we have already climbed for 1 period and 1 section since the yearly bottom on June 1st I am suspecting a bear day tomorrow is the higher probability outcome.
Although the Chikou has finally cleared the Kumo, and the tenkan/kijun are still climbing strong, I am looking for the pair to fade in the very near future, either at 1.0551 or 1.0642 and will look for intraday ichimoku sell signals at those levels. Bulls can meanwhile wait for corrective pullbacks towards the daily kijun which held the last bounce and produced the 5 day climb you see today.
Dow
Climbing for three days straight, the DOW is approaching a major resistance which is the yearly highs at 13300 and the triple top as well which starting the sell off towards the yearly lows so it's pretty hard to ignore this potential signal coming up. I will look for price action triggers at this level along with weakness on the intraday charts with tight stops above targeting 13151 and 13042 offering some really strong reward to risk ratios. A break and close above the yearly highs suggests likely continuation so look for a breakout pullback setup here.
After forming a new yearly low last week, the pair produced its strongest 3 day climb (from top to bottom) for the entire 2012 year which is impressive considering the economic situation is far worse than it was in 2011. I suspect this was more of a short squeeze than anything, and am really just waiting for the shoe to drop (any) which means either Spain asking for another bailout and admitting they are broke, Greece leaving the EZ, or Germany not wanting to bail out any more countries.
Regardless, I'm taking the sell rallies approach, especially considering the range of the last two days which is a choppy range with the 1.2389 highs and 1.2224 lows. Intraday players can look for price action reversal plays at these levels should volatility and volume be down for tomorrow. Meanwhile, my sell on rally point is first parked at 1.2415 which was range support for the last 3 weeks of June. My other medium term rally point to sell is the weekly 20ema and Jan. 12' lows at 1.2630.
EURAUD
In last weeks price action & ichimoku chart commentary, I talked about how the EURAUD was a pair I was looking to sell on pullbacks to the Tenkan line as it held below this since late June, and every pullback to the tenkan line resulted in a rejection and further losses. This is exactly what happened last week as the pair (after forming an outside bar) faltered into the tenkan line, and continued selling off over 150+pips so with very little stop needed so hopefully you profited from this.
Intraday ichimoku traders can wait for a pullback again to the daily tenkan, or perhaps a deeper pullback to the 1.1750 level which is the 4hr tenkan and range support that is now resistance.
AUDUSD
Speaking of the Aussie, the AUDUSD has climbed for the last 5 days which is impressive since its only done this 5x in the last 1.5yrs. What is interesting to note is it has not had a 6 day climb for all of 2012 and only 2 of 2011. This, combined with the fact (from an ichimoku number theory perspective) we have already climbed for 1 period and 1 section since the yearly bottom on June 1st I am suspecting a bear day tomorrow is the higher probability outcome.
Although the Chikou has finally cleared the Kumo, and the tenkan/kijun are still climbing strong, I am looking for the pair to fade in the very near future, either at 1.0551 or 1.0642 and will look for intraday ichimoku sell signals at those levels. Bulls can meanwhile wait for corrective pullbacks towards the daily kijun which held the last bounce and produced the 5 day climb you see today.
Dow
Climbing for three days straight, the DOW is approaching a major resistance which is the yearly highs at 13300 and the triple top as well which starting the sell off towards the yearly lows so it's pretty hard to ignore this potential signal coming up. I will look for price action triggers at this level along with weakness on the intraday charts with tight stops above targeting 13151 and 13042 offering some really strong reward to risk ratios. A break and close above the yearly highs suggests likely continuation so look for a breakout pullback setup here.
*I've been gone for 5 weeks on vacation but am now back writing from command central so expect articles daily from Sun-Thur from here on out along with bonus articles on Friday.
AUDUSD
Since the 20th of June, the Aussie has been in an upward sloping channel which has been rather orderly making a touch on the top and then venturing to the bottom....until recently. Lately, it has been hanging around the upper band of this channel and putting pressure on the topside (along with the sellers in the market). SEE CHART BELOW.
Generally, when you see this in a range or channel, it means the sellers are being squeezed out of the market as they are unable to make any progress to the downside while the bulls apply continuous pressure on them squeezing them out of the market. This ability for price to remain towards the upper boundary of the channel will no doubt bring other players in who are also noticing this price action. Thus, I am favoring more of a breakout to the upside.
However, I do see a sticky level below which is a failure point for me, meaning should the bulls fail to hold this level, then the bears should be able to make some headway to the downside. This failure point at 1.0533 is a nice role reversal level which was resistance back in the end of July and support on Aug. 7th. Should this level fail to hold the price action up, I would suspect this could be a good place for bears to get in as prices should decline to about 1.0445 which was also a role reversal level and a key support area behind this last leg, so plays for both bulls and bears here.
For those wanting to learn to trade price action, get access to the traders forum, quantitative data on price action, lifetime membership & more, visit my forex price action course page.
AUDUSD
Since the 20th of June, the Aussie has been in an upward sloping channel which has been rather orderly making a touch on the top and then venturing to the bottom....until recently. Lately, it has been hanging around the upper band of this channel and putting pressure on the topside (along with the sellers in the market). SEE CHART BELOW.
Generally, when you see this in a range or channel, it means the sellers are being squeezed out of the market as they are unable to make any progress to the downside while the bulls apply continuous pressure on them squeezing them out of the market. This ability for price to remain towards the upper boundary of the channel will no doubt bring other players in who are also noticing this price action. Thus, I am favoring more of a breakout to the upside.
However, I do see a sticky level below which is a failure point for me, meaning should the bulls fail to hold this level, then the bears should be able to make some headway to the downside. This failure point at 1.0533 is a nice role reversal level which was resistance back in the end of July and support on Aug. 7th. Should this level fail to hold the price action up, I would suspect this could be a good place for bears to get in as prices should decline to about 1.0445 which was also a role reversal level and a key support area behind this last leg, so plays for both bulls and bears here.
For those wanting to learn to trade price action, get access to the traders forum, quantitative data on price action, lifetime membership & more, visit my forex price action course page.
EURUSD
After the massive losses in the Euro from mid-April to mid-July, the pair has been forming smaller price spreads (in the downtrend) while the bulls in the counter trend move are starting to out strike the bears. This to me is suggestive of an exhausted 3-mos down-move finding no new bears (at the moment). This has led to the bulls demonstrating some ability to take short term control as they continue to build higher lows and higher highs with greater volatility (meaning greater participation from the bulls).
We are though in a channel for the last 3 weeks which is relatively structured, offering plays for bears and bulls (slight edge to bulls for now short term).
Why do I short term favor the bulls?
Well, since the start of this channel on July 19th, out of 17 days, there have been 11 bear bars printed with 6 bull bars, yet the prices are printing higher lows and higher highs, communicating who is in control. Thus, if you are playing intraday, you are more likely to profit on the bear side, but with less profit. However if you are playing the bull side, you have a greater chance of more profit, but less opportunities probability wise, so pick your tonic.
Bulls can watch for plays on the lower end of the channel around 1.2215/20-ish while bears can look for plays around 1.2450 which is a nice role reversal level, and 1.2500 being the projected channel top and round number.
AUDUSD
After an impressive 2-mos climb of 1000+pips from the pin bar off .9600 to the 1.0600 figure, the Aussie appears to be in a re-distribution phase minimally, and possibly running out of steam. Although the Chikou is clear of the Kumo, and the Tenkan and Kijun are in strong trending order, the last several days have been unimpressive from both sides of the market. With the bulls in control, and the bears providing very little push back, why haven't the bulls capitalized and taken out the recent swing highs at 1.0612?
Although price action has formed a pin bar off the tenkan, it still needs to clear the 1.0612 highs before attracting any new buyers. If the pin bar lows and tenkan fail to hold with a daily close below 1.0500, I suspect we could see a pullback towards the Kijun at 1.0350 before bulls come back in as there doesn't seem like much enthusiasm at these levels. It should be noted that since price has been above the Kijun back in early June, this is the second longest flat period for the Kijun. But this time, it is happening with declining volatility so a pullback seems natural at this point.
Gold
Stuck between the $1630 and multi-year support at $1530 since May, the precious metal is making a case for a potential upside break in the near future. From a basic price action perspective, the upside level continues to be attacked (4x since May) while the downside level has only been attacked (3x) and it was all done in the month of May. Since then, the metal continues to build higher lows and sharper price action angles on the downside, which is definitely putting pressure on the bears holding the defenses at $1630. The last pullback rejection from $1630 only sufficed one day below the 20ema, and has since resurfaced above it, further communicating the continual pressure from the bulls.
Since we have not had a daily close above this level since May 7th, I suspect any daily close above it will bring in a fresh round of buyers so watch for a breakout pullback setup here as I don't expect any breakout to take off for the moon since the volatility has been so low lately. If a breakout is to occur and this price action squeeze or pressure continues as is, I'd expect a breakout either this week or the next as there isn't much more room for this pattern to play with, suggesting a quiet accumulation is building for the precious metal, perhaps for a big upcoming Aug/Sept. move which is the traditional time Gold has made its big surges historically. Bears can simply take plays off this key resistance level with tight stops above targeting the daily 20ema.
Dow
Climbing 4 weeks in a row, the Dow has gained 7 of the last 10 weeks since the yearly lows printed in early June. The index has been well supported as of late with all the major rejections being to the downside and two weeks ago forming a with-trend pin bar off the weekly 20ema.
However, price action is approaching a critical resistance at 13300 which is the yearly high and a daily triple top. It should be noted it is doing this on some of the weakest volume in over 5 years, suggesting the institutions are not really buying into this. I think there is definitely a price action play here around 13300 with stops above the yearly highs targeting 13051 and potentially the weekly 20ema around 12850
After the massive losses in the Euro from mid-April to mid-July, the pair has been forming smaller price spreads (in the downtrend) while the bulls in the counter trend move are starting to out strike the bears. This to me is suggestive of an exhausted 3-mos down-move finding no new bears (at the moment). This has led to the bulls demonstrating some ability to take short term control as they continue to build higher lows and higher highs with greater volatility (meaning greater participation from the bulls).
We are though in a channel for the last 3 weeks which is relatively structured, offering plays for bears and bulls (slight edge to bulls for now short term).
Why do I short term favor the bulls?
Well, since the start of this channel on July 19th, out of 17 days, there have been 11 bear bars printed with 6 bull bars, yet the prices are printing higher lows and higher highs, communicating who is in control. Thus, if you are playing intraday, you are more likely to profit on the bear side, but with less profit. However if you are playing the bull side, you have a greater chance of more profit, but less opportunities probability wise, so pick your tonic.
Bulls can watch for plays on the lower end of the channel around 1.2215/20-ish while bears can look for plays around 1.2450 which is a nice role reversal level, and 1.2500 being the projected channel top and round number.
AUDUSD
After an impressive 2-mos climb of 1000+pips from the pin bar off .9600 to the 1.0600 figure, the Aussie appears to be in a re-distribution phase minimally, and possibly running out of steam. Although the Chikou is clear of the Kumo, and the Tenkan and Kijun are in strong trending order, the last several days have been unimpressive from both sides of the market. With the bulls in control, and the bears providing very little push back, why haven't the bulls capitalized and taken out the recent swing highs at 1.0612?
Although price action has formed a pin bar off the tenkan, it still needs to clear the 1.0612 highs before attracting any new buyers. If the pin bar lows and tenkan fail to hold with a daily close below 1.0500, I suspect we could see a pullback towards the Kijun at 1.0350 before bulls come back in as there doesn't seem like much enthusiasm at these levels. It should be noted that since price has been above the Kijun back in early June, this is the second longest flat period for the Kijun. But this time, it is happening with declining volatility so a pullback seems natural at this point.
Gold
Stuck between the $1630 and multi-year support at $1530 since May, the precious metal is making a case for a potential upside break in the near future. From a basic price action perspective, the upside level continues to be attacked (4x since May) while the downside level has only been attacked (3x) and it was all done in the month of May. Since then, the metal continues to build higher lows and sharper price action angles on the downside, which is definitely putting pressure on the bears holding the defenses at $1630. The last pullback rejection from $1630 only sufficed one day below the 20ema, and has since resurfaced above it, further communicating the continual pressure from the bulls.
Since we have not had a daily close above this level since May 7th, I suspect any daily close above it will bring in a fresh round of buyers so watch for a breakout pullback setup here as I don't expect any breakout to take off for the moon since the volatility has been so low lately. If a breakout is to occur and this price action squeeze or pressure continues as is, I'd expect a breakout either this week or the next as there isn't much more room for this pattern to play with, suggesting a quiet accumulation is building for the precious metal, perhaps for a big upcoming Aug/Sept. move which is the traditional time Gold has made its big surges historically. Bears can simply take plays off this key resistance level with tight stops above targeting the daily 20ema.
Dow
Climbing 4 weeks in a row, the Dow has gained 7 of the last 10 weeks since the yearly lows printed in early June. The index has been well supported as of late with all the major rejections being to the downside and two weeks ago forming a with-trend pin bar off the weekly 20ema.
However, price action is approaching a critical resistance at 13300 which is the yearly high and a daily triple top. It should be noted it is doing this on some of the weakest volume in over 5 years, suggesting the institutions are not really buying into this. I think there is definitely a price action play here around 13300 with stops above the yearly highs targeting 13051 and potentially the weekly 20ema around 12850